Before deciding to campaign for federal office, an individual may want to "test the waters"—in other words, explore the feasibility of becoming a candidate. An individual who spends money merely to test the waters (but not to campaign for office) does not have to register as a candidate. Nevertheless, funds raised to test the waters are subject to the Federal Election Campaign Act’s (the Act) limits and prohibitions.
Once an individual begins to campaign or decides to become a candidate, funds that were raised or spent to test the waters apply to the $5,000 threshold for qualifying as a candidate. Once that threshold is exceeded, the individual must register and begin filing reports.
Testing the waters vs. campaigning
While testing the waters, an individual may carry out a variety of activities, such as conducting polling, traveling around a district or state, and placing telephone calls to see if there is sufficient support for a candidacy. Certain activities, however, indicate that the individual is no longer testing the waters. Those activities include:
- Making or authorizing statements that refer to themselves as candidates ("Miller in 2020" or "Wilson for Senate");
- Using general public political advertising to publicize their intention to campaign;
- Raising more money than what is reasonably needed to test the waters or funds to be used after candidacy is established;
- Conducting activities over a protracted period of time or shortly before the election; or
- Taking action to qualify for the ballot.
Individuals who engage in these activities may no longer qualify for the testing the waters exemption, and if that is the case, would need to register as a candidate if they have raised or spent more than $5,000.
If an individual decides not to run for federal office, there is no obligation to report testing the waters activity, and the donations made to a testing the waters committee will not count as contributions.
Contributions towards testing the waters
An individual who tests the waters must keep financial records. If the individual becomes a candidate, the money raised and spent to test the waters counts toward the $5,000 registration threshold and must be reported by the campaign.
Contribution limits apply to all the support given to an individual who is testing the waters. The limits apply, for example, to:
- Gifts of money, goods, and services;
- Loans (except bank loans);
- Certain staff advances until repaid;
- Endorsements and guarantees of bank loans; and
- Funds given or personally loaned to the individual to pay for his or her living expenses during the testing the waters period.
Additionally, an individual who is testing the waters must comply with the Act'sprohibitions. Specifically, the Act prohibits money from:
- Labor organizations (not including funds from a labor separate segregated fund);
- Corporations, including nonprofit corporations (although funds from a corporate separate segregated fund are permissible);
- National banks;
- Foreign nationals; or
- Federal government contractors.
Organizing a testing the waters committee
An individual may organize a committee for testing the waters. An exploratory committee or a testing the waters committee is not considered a political committee under the Act and is not required to register with the FEC or to file reports. The name of the testing the waters committee and statements made by committee staff must not refer to the individual as a candidate. For instance, a testing the waters committee may be named "Samantha Jones Exploratory Committee," but not "Samantha Jones for Congress."
If the committee's activities go beyond testing the waters and an individual becomes a candidate under the Act, the committee must register and begin filing reports. The funds raised during testing the waters will become contributions, and funds spent will become expenditures. These contributions and expenditures count toward the $5,000 threshold that initiates candidate status.
Although this is not a requirement, an individual who tests the waters may want to segregate testing the waters funds from personal funds by setting up a separate bank account. If the individual later becomes a candidate, a campaign account must be established to keep campaign funds separate from their personal funds.
Reporting testing the waters activity
When filing the first report due after registering as a political committee, the principal campaign committee (and other authorized committees of the campaign) must disclose all financial activity that occurred before registration and before the individual became a candidate (including any testing the waters activity), beginning with the first date of activity through the end of the current reporting period.